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First RBI MPC meet for FY25 starts today: Here is all you need to know

RBI Policy Meet: Experts believe the RBI will keep the repo rate unchanged at 6.5% and focus on bringing inflation towards the 4% target

RBI Governor Shaktikanta Das

RBI Governor Shaktikanta Das

Vasudha Mukherjee New Delhi

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Reserve Bank of India (RBI) Governor Shaktikanta Das is set to unveil the inaugural monetary policy of the financial year 2024-25 (FY25) on Friday, April 5. The RBI's rate-setting panel will conduct a two-day review meeting to set forth the direction of the central bank for the coming financial year.

The RBI is scheduled to release this policy review on April 5. Here is everything you need to know about the RBI MPC meeting, its relevance, and what to expect.

Who will lead the Monetary Policy Committee?

Comprising six members, the Monetary Policy Committee (MPC) will be chaired by RBI Governor Shaktikanta Das. Das' tenure as the RBI Governor is slated to conclude in December this year. Other members of the MPC include Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra.

What is the role of the RBI MPC?

The MPC convenes at least four times annually to evaluate the economic landscape. This includes inflation and growth metrics.

The committee discusses the direction the central bank wants to pursue throughout FY25, aiming to strike a balance between sustaining growth and maintaining inflation within the four per cent target.

Following this assessment, the committee decides whether to maintain, raise, or lower the repo rate. Subsequently, the MPC issues a policy statement elucidating its decision-making rationale.

Why is the RBI monetary policy meet important?

The MPC's resolutions wield substantial influence over the Indian economy. They impact inflation by aligning the repo rate to maintain it within the government's targeted range.

Lower interest rates can stimulate borrowing and investment, fostering economic activity.

Moreover, the MPC's actions contribute to financial stability by managing liquidity and credit flow.

What is repo rate?

The repo rate denotes the interest rate at which the RBI lends to banks. 'Repo' abbreviates 'repurchasing option' or 'repurchase agreement.' In this mechanism, scheduled commercial banks furnish securities like treasury bills or gold to the RBI, availing overnight credit during liquidity shortages.

In February, the RBI retained the repo rate at 6.5 per cent for the sixth consecutive time, with a majority decision of 5-1. The last alteration to the repo rate occurred in February 2023, which increased from 6.25 per cent to 6.5 per cent. Between May 2022 and February 2023, the repo rate escalated by 250 basis points (bps).

What are the RBI MPC meeting expectations?

Experts anticipate the RBI will maintain the key interest rate unchanged in April, focusing on steering inflation towards the four per cent target, following alleviated concerns regarding economic growth, with GDP growth projected at nearly 8 per cent.

Additionally, the MPC, akin to central banks in major economies like the US and UK, might adopt a cautious stance on interest rate adjustments.

Respondents in a Business Standard poll anticipate the RBI to commence rate cuts in the third quarter of 2024-25, with some foreseeing this action as early as Q3FY25. Factors such as incoming data, weather conditions during the impending hotter months, and global interest rate trends will shape policy decisions.

All respondents concurred that the RBI will persist with its "withdrawal of accommodation" stance, which is closely intertwined with interest rates, as RBI Governor Shaktikanta Das highlighted during the February meeting.

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First Published: Apr 03 2024 | 11:58 AM IST

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